please do them all Question 1 (1 point) Calculate the present value of a perpetu

Question

please do them all

Question 1 (1 point) Calculate the present value of a perpetuity bond that is expected to pay $50 of interest per year if the investor requires an annual return of 8 percent? o $602 $625 o $565 o $655 Save Question 2 (1 point) Determine the approximate size of the annual payment needed to retire $70,000,000 in bonds issued by a city to build a dam. The bonds must be repaid over a 50 year period and they earn an annual rate of 6%, compounded annaully. (Hint: 50 years may be taken a s infinite) o $4,200,000 o $350,000 $1,400,000 O $140,000 Save Question 3 (1 point) Determine the amount of money required to generate an infinite number of annual payments of $5000 each if the interest rate is 10% per year, compounded continuously? $47,542 O $45,001 o $55,000 $50,000 Save

Explanation / Answer

Dear student, only one question is allowed at a time. I am answering the first question

1)

Value of a perpetuity

= A / r

Where,

A = Annual payments for infinite period = $50

r = Required rate of return of the investors = 8% or 0.08

So, Value of perpetuity

= $50 / 0.08

= $625

So, option B is the correct option

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